Interest Groups and the Competition Between Green and Dirty Technologies


While “enlightened” entrepreneurs such as Bloomberg, Musk and Steyer celebrate the nascent green economy, there are other entrepreneurs growing rich from fracking activity.   Today there is a race between “green technologies” that have a smaller climate change impact than fossil fuel technologies.  Economists such as Acemoglu et. al. have studied how “sustainable” development could result depending on the relationship between these two technologies and government policies intended to tilt the playing field towards green tech.
In my past work, I have documented the fact that educated progressives (i.e Californians) are more likely to purchase green products.  Take a look at my hybrids work, and my solar work.
But, today — a new NBER Working Paper got me thinking about another key margin here;  workers.  At this time when there is great concern about income inequality and the well being of the middle class; does the green economy or the fracking sector create more jobs for the low skilled?  If the low skilled benefit both from cheap gas prices (as car drivers) and from employment opportunities in the fossil fuel sector (as frackers) , then they will not support carbon pricing.  My past political economy research ; read this and this,  supports this claim.  In this case, the greenhouse gas mitigation effort has a challenge in convincing the median voter.
So, this was a long winded intro for talking about this recent NBER paper;

Who Needs a Fracking Education? The Educational Response to Low-Skill Biased Technological Change

Elizabeth U. Cascio, Ayushi Narayan

NBER Working Paper No. 21359
Issued in July 2015
NBER Program(s):   CH ED EEE LS

Over the past decade, a technological breakthrough – hydraulic fracturing or “fracking” – has fueled a boom in oil and natural gas extraction by reaching shale reserves inaccessible through conventional technologies. We explore the educational response to fracking, taking advantage of the timing of its widespread introduction and the spatial variation in shale oil and gas reserves. We show that local labor demand shocks from fracking have been biased toward low-skilled labor and males, reducing the return to high school completion among men. We also show that fracking has increased high school dropout rates of male teens, both overall and relative to females. Our estimates imply that, absent fracking, the male-female gap in high school dropout rates among 17- to 18-year-olds would have narrowed by about 11% between 2000 and 2013 instead of remaining unchanged. Our estimates also imply an elasticity of high school completion with respect to the return to high school of 0.47, a figure below historical estimates. Explanations for our findings aside from fracking’s low-skill bias – changes in school inputs, population demographics, and resource prices – receive less empirical support.

So, the authors of this paper are interested in how human capital attainment choice is affected by labor demand shocks.  I’m interested in a different question; what is the economic incidence for lower socio-economic groups from a boom in fossil fuels? Their evidence suggests that Tom Steyer’s push to nudge us away from extracting fossil fuels  won’t have many supporters away from Stanford and UC Berkeley.
Self interested workers in industries that will be injured by carbon mitigation regulation have strong incentives to oppose such regulation.     How will Steyer’s team respond to this challenge? How will he avoid being painted as an elitist? Will he say that “the people” are the ones who will be hurt by climate change?  “The people” are likely to counter that if they are allowed to earn and work in these growing sectors that they will earn the $ to be able to protect themselves.
Back in 1997, John Matsusaka and I published a paper studying Californian voting on direct democracy initiatives related to environmental protection.  We found that voters in agricultural and manufacturing counties voted against specific pieces of regulation that threatened their industry’s well being (even though they protected the environment). Our paper was squarely in the University of Chicago/Peltzman School of political economy.  The same issues are very relevant today. It is no accident that President Obama (because of his war on coal) isn’t that popular in West Virginia.

Interest Groups and the Competition Between Green and Dirty Technologies
Matthew Kahn
Sat, 05 Sep 2015 15:17:00 GMT

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama


By request, here is another update of an earlier post through the August employment report.
NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.
Note: We frequently use Presidential terms as time markers – we could use Speaker of the House, or any other marker.
Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.
First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan’s 2nd term saw about the same job growth as during Carter’s term.  Note: There was a severe recession at the beginning of Reagan’s first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter’s term (gas prices increased sharply and there was an oil embargo).

Private Sector
Jobs Added (000s)


Reagan 1

Reagan 2

GHW Bush

Clinton 1

Clinton 2

GW Bush 1

GW Bush 2

Obama 1

Obama 2

131 months into 2nd term: 10,648 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). President George H.W. Bush only served one term, and President Obama is in the third year of his second term.
Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early ’80s right after Mr. Reagan (yellow) took office.
There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.
Private Sector Payrolls Click on graph for larger image.
The first graph is for private employment only.
The employment recovery during Mr. G.W. Bush’s (red) first term was sluggish, and private employment was down 844,000 jobs at the end of his first term.   At the end of Mr. Bush’s second term, private employment was collapsing, and there were net 463,000 private sector jobs lost during Mr. Bush’s two terms. 
Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.
Private sector employment increased by 20,955,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).
There were only 2,018,000 more private sector jobs at the end of Mr. Obama’s first term.  Thirty one months into Mr. Obama’s second term, there are now 8,895,000 more private sector jobs than when he initially took office.
Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 
The public sector grew during Mr. Carter’s term (up 1,304,000), during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,744,000 jobs).
However the public sector has declined significantly since Mr. Obama took office (down 584,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level.  This has been a significant drag on overall employment.
And a table for public sector jobs. Public sector jobs declined the most during Obama’s first term, and increased the most during Reagan’s 2nd term.

Public Sector
Jobs Added (000s)


Reagan 1

Reagan 2

GHW Bush

Clinton 1

Clinton 2

GW Bush 1

GW Bush 2

Obama 1

Obama 2

131 months into 2nd term, 183 pace

Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don’t expect a sharp decline in private employment as happened at the end of Mr. Bush’s 2nd term (In 2005 and 2006 I was warning of a coming recession due to the bursting of the housing bubble).
For the public sector, the cutbacks are clearly over at the state and local levels, and it appears cutbacks at the Federal level might also be over.  Right now I’m expecting some increase in public employment during Obama’s 2nd term, but nothing like what happened during Reagan’s second term.
Below is a table of the top three presidential terms for private job creation (they also happen to be the three best terms for total non-farm job creation).
Clinton’s two terms were the best for both private and total non-farm job creation, followed by Reagan’s 2nd term.
Currently Obama’s 2nd term is on pace to be the 2nd best ever for private job creation.  However, with very few public sector jobs added, Obama’s 2nd term is only on pace to be the third best for total job creation.
Note: Only 118 thousand public sector jobs have been added during the first thirty one months of Obama’s 2nd term (following a record loss of 702 thousand public sector jobs during Obama’s 1st term).  This is less than 10% of the public sector jobs added during Reagan’s 2nd term!

Top Employment Gains per Presidential Terms (000s)

Total Non-Farm

Clinton 1

Clinton 2

Reagan 2

Obama 21


131 Months into 2nd Term
2Current Pace for Obama’s 2nd Term

The last table shows the jobs needed per month for Obama’s 2nd term to be in the top three presidential terms.

Average Jobs needed per month (000s)
for remainder of Obama’s 2nd Term

to Rank




Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama
Bill McBride
Fri, 04 Sep 2015 18:02:00 GMT

Weekend Reading; Daniel Larison: Scowcroft, the GOP, and the Nuclear Deal

My emphasis added below.

Daniel Larison: Scowcroft, the GOP, and the Nuclear Deal:

Brent Scowcroft writes in favor of the deal with Iran:

Let us be clear: There is no credible alternative were Congress to prevent U.S. participation in the nuclear deal. If we walk away, we walk away alone. The world’s leading powers worked together effectively because of U.S. leadership. To turn our back on this accomplishment would be an abdication of the United States’ unique role and responsibility, incurring justified dismay among our allies and friends. We would lose all leverage over Iran’s nuclear activities. The international sanctions regime would dissolve. And no member of Congress should be under the illusion that another U.S. invasion of the Middle East would be helpful.

Gen. Scowcroft makes a strong case for the nuclear deal, and a more sober and responsible Republican Party would listen carefully to what he has to say. Regrettably, we already know that on foreign policy generally and this issue in particular the current GOP is neither of those things. Comparisons between the debate over the Iraq war and the debate over the current deal with Iran can be overdone, but it is instructive to remember that Scowcroft was one of a relative few prominent Republicans to oppose the invasion of Iraq publicly. Now he is one of a very few former Republican officials to express support for the nuclear deal.

It’s not an accident that he was right about the Iraq war. Supporters of the invasion erred in failing to consider the costs and risks of an unnecessary war because of their shoddy assumptions about American power and how to use, and Scowcroft opposed the invasion in large part because he was willing and able to weigh those costs and judge them to be unacceptably high. Unlike the loudest advocates for the invasion, Scowcroft didn’t think preventive war in Iraq made sense as far as American security was concerned, and he was also warning about the many unintended and unforeseen consequences that wars have. Applying wisdom and prudence then, Scowcroft got one of the biggest foreign policy questions of the last generation right while almost everyone in and out of elected office in his party (and many in the other party) got it badly wrong. So when the same person advises support for the nuclear deal as the sound and responsible thing to do now, his recommendation should carry considerable weight. If there is to be any accountability in our foreign policy debates, it isn’t enough to reject discredited hard-liners. It is also necessary to heed the skeptics and realists that have proved to be discerning and farsighted.

So it is more than a little strange that Scowcroft is once again almost alone among prominent Republicans in taking a pro-deal position. His caution and warnings from 2002 were thoroughly vindicated, but instead of causing Republicans to pay more attention to his advice his opposition to the war effectively made him persona non grata in his own party. If any Republican candidates have sought his counsel on foreign policy, they aren’t advertising it to anyone, and most of them wouldn’t want to linked to him for fear of being labeled too much of a realist. One reason not to trust most Republican candidates on foreign policy is that they consciously go out of their way to ignore the best advice that former officials from their party have to offer. In a competent and responsible party, Scowcroft’s argument for the deal would provide ample cover for many members of Congress and presidential candidates to support it. Unfortunately, we already know that his endorsement of the deal will instead be cited as a reason why Republican candidates should shut their ears to his words.

Weekend Reading; Daniel Larison: Scowcroft, the GOP, and the Nuclear Deal
J. Bradford DeLong
Sat, 05 Sep 2015 12:20:57 GMT

The Controversial Clerk

I disagree with this:


Jail for someone, failing to do their job seems in appropriate in a free society to me.  Jail is, or should be reserved for a small set of grievous acts against others.  Not doing your job generally doesn’t reach this level.

Make no mistake, she’s not doing her job.  The best parallel I can think of is a tank driver, or bomber pilot refusing to fire on the enemy, perhaps at a crucial time because they are opposed to violence because of their religious beliefs.  You can support, or at least respect their dedication.  You can’t leave them in the tanks and planes.  You take them out  of  battle as a conscientious objector.

Normally, if you can’t or won’t do a job, you should quite.  Its wrong to take the position if you won’t do the work, and that’s what going on here.  In short, I think she should quite, not stay in here position but refuse  to do the job.  Failing that she should be  removed from office however necessary.

Those who oppose her views should also be aware that putting her  in jail, will almost certainly make here a marauder.  Is that what they want?

The Lump of Jobs

I  saw this on Facebook:


It’s from Reason magazine, and I was thinking about the “lump of Jobs fallacy”.    Here’s a reference.

It seems to me that this kind of thinking is really either a lack of creativity, or a lack of faith in human creativity.

The lump of Jobs fallacy assumes that there are only a fixed number of jobs that can be done.  Jobs are scare, and workers are allocated to those jobs.  If new laborers appear in the form of immigrants, than incumbent workers will be displaced from their jobs.  If jobs are automated then some workers again will pushed out of their scarce jobs.  In both cases the take home pay in total is reduced, and society is worse off.  Here’s bit from Reason on the scale of destruction of current jobs:

In 2013, the Oxford University futurists Carl Benedikt Frey and Michael A. Osborne warned that 47 percent of all jobs in the U.S. are at risk of being automated over the next 20 years. Sounds frightening—until you consider what percentage of jobs has been automated away in the recent past. Jobs in manufacturing and agriculture, which accounted for 33 percent of American employment in 1950, are now down to 12 percent. The number of U.S. manufacturing jobs peaked at just below 20 million in 1979 and has fallen to under 12 million today. Many went offshore, but many more were automated away.

This flies in the face of an economists perspective.  Here, jobs aren’t scarce, labor is.  In fact there are a boundless stock of tasks that need to be done.  New workers or machines to do work expand the range of output that society can produce and consume.  Both immigration and automation make society better off.


I find it interesting that both the right and left tend to fall into the lump of labor fallacy, but emphasize different aspects of it.   Right wingers seem, at least lately, to fear influxes of new workers, and oppose immigration.   The left seems to fear anything that increases productivity, including trade and automation.

But both think that the jobs to do are limited mostly to those available today.  If new workers come they’ll force some current workers into unemployment.  Making workers less productive will create jobs to produce the same outputs.  The same output!

There’s the problem.  In fact, we all live with scarcity, scarcity of:

  • time
  • medical care
  • education
  • and more

If people pushed out of existing jobs don’t find something else to do that says, we’re uncreative and can’t allocate the displaced workers to new tasks, or the new tasks while making society as whole better off reward those workers less and they choose unemployment over a pay cut. 

After all as more current mundane jobs are displaced, then shouldn’t we be able to allocate people to what they are passionate about, not just what needs to be done to keep body and soul together?  The main reason we don’t spend most of our time acquiring food by hunting or farming, is that productivity has freed up most people to first make manufactured goods, and now more so services.  If we can’t find new jobs making new things we’re uncreative. 

As more mundane jobs are automated, then perhaps more  young people may go into something they are passionate about.  Think how many people once aspire to some artistic or creative profession, and automation over time will perhaps direct more to follow their passion – the star below.


Reason said it pretty well:

Perhaps more chefs will prepare fine meals in the homes of clients, dramatists devise elaborate virtual environments as entertainment, tailors create one-of-kind bespoke garments. Who the hell knows?

It seems that for many thought their alternative  employment may pay less., though society  as whole will have their new services and whatever they were making before.

I suspect we do have both problems.  How else to explain the persistence of the lump of labor fallacy?  Of the two the problem of new jobs but less well paying is more serious.  It means that while society benefits from automation and immigration, some workers are worse off.

A Little Perspective


As recently as a few months ago, doctors were held in high esteem and educated people believed that medicine could be useful. All that changed, of course, with the medical profession’s stunning failure to prevent or even predict the breakout of ebola in West Africa. Worse yet, many doctors to this very day cling to their old ways of thinking, writing prescriptions, setting broken bones, and performing surgery in bull-headed defiance of the urgent need to jettison everything we know about medical practice and start over from scratch.

Nobody, of course, writes such nonsense about medicine. Why, then, do so many write equivalent nonsense about economics?

Most economists failed to predict the 2008 financial crisis and ensuing recession for pretty much the same reason most doctors failed to predict the 2014 ebola epidemic — their attention was, quite reasonably, directed elsewhere. It’s easy to say in hindsight that if economists had paid more attention to the shadow banking system, they’d have seen what was coming. But attention is finite, and if economists had paid more attention to the shadow banking system, they’d have paid less attention to something else.

For a little perspective, have a look at this chart showing U.S.~per capita income in fixed (2005) dollars:

That little downward blip you see near the top is the recent crisis. The somewhat bigger downward blip in the 1930s is the Great Depression. The moral is that in the overall scheme of things, recessions don’t matter very much. At the trough of the Great Depression, people lived at a level of material comfort that would have seemed unimaginably luxurious to their grandparents. Today, while Paul Krugman continues to lament “the mess we’re in”, Americans at every income level live far better than Americans of, say, 1980. If you doubt that, you surely don’t remember what life was like in 1980. Here’s how to fix that: Pick a movie from 1980 — pretty much any movie will do — and count the “insurmountable” problems that the protagonist could have solved in an instant with the technology of 2014. Or reread any of the old posts on this page.

If you care about human well-being, recession-fighting is small potatoes. It’s that long-term upward trend that matters. And economists, fortunately, understand a lot about what it takes to nourish that trend — things like well-enforced property rights, the rule of law, free trade, sound money, limited regulation and low marginal tax rates. Even more fortunately, economists have managed, however imperfectly and with fits and starts, to impress that understanding on the minds of policymakers. As a result (and going back, at least, to the repeal of the Corn Laws), we’ve had better policies and greater prosperity.

To throw out all that hard-won knowledge because we failed to prevent a financial crisis would be like closing all the hospitals because doctors failed to prevent an epidemic.

Moreover, it’s entirely possible that some of the best policies for fighting recessions are inimical to long-term growth. It could easily follow that even if you knew exactly how to fight recessions, you might prefer not to.

It’s a very good thing that some economists are trying to understand recessions, and a very good thing that they’re accounting for the lessons of the past few years. It’s also a very good thing that most economists are working in the myriad of other areas where we’re capable of doing good. Another very good thing is historical perspective. The current so-called “mess” that economists have (partly) gotten us into is not just the most prosperous era in human history; it is prosperous beyond the wildest imaginings of your parents’ generation. And yes, economists helped get us here.


A Little Perspective
Steve Landsburg
Mon, 06 Oct 2014 06:01:23 GMT